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Michael Jardine

January 10, 2012

CHAPTER 4

The Jardine Range

“What goes up, must come down.”– Sir Isaac Newton

“What goes down, must come up.” – the Jardine Range Corollary

Figure 4.1 and Figure 4.2 illustrate the two options for the trading day.

What Goes Up

Several years ago, it occurred to me that each day starts out with a natural potential trading range. The idea of a range makes sense because nobody really has any idea whether the market will go up or down. Usually, it does both, but nobody has any idea, on any given day, whether the market day will finish up or down. If someone did hold that information, he or she would be rich—and very lucky.

Natural and Potential

It is, however, possible to determine a natural potential range for the market, on any given day. This is not to say that the market will go up to the top of the range, nor that it will go down to the bottom of the range; but in terms of potentiality, it is quite easy to determine a range within which the market will naturally trade, and to at least one end of which it will trade and then reverse. What does that mean? Three things:

If prices move up to the top of the range, they will then reverse trade back down. This is shown in Figure 4.1.

If prices move to the bottom of the range, they will then reverse and move back up. This potentiality is shown in Figure 4.2.

If prices move outside of the range, then something unnatural is happening, like news or a slew of earnings reports, for example. Or, perhaps, just a stronger overall trend that was only temporarily halted at the extreme of the range.

Let’s observe what happened to the S&P E-mini Futures market on September 30, 2009.

Figure 4.3 shows that the market closed at 1054.50 on Tuesday. In preparing for the next trading day, I observed that there was a VPC above where the market closed, at 1059.00. I also noticed that there was a VPC below where the market closed, at 1044.00. The market will open in between those two points. Those two points form a natural trading range, which I call the Jardine Range. There are a few important points to recognize about the Jardine Range.

Two Turning Points—That’s It

First and perhaps most obvious, the closest VPC above the market open and the closest VPC below the market open constitute the Jardine Range. I usually draw a box to indicate the range.

React, Don’t Predict

The Jardine Range does not aim to predict anything. Its sole purpose is to provide a basis for reacting, not predicting. It is important to remove opinion, conjecture, and as much other outside “noise” as possible from the trading decision, because those will freeze you like a deer in headlights when it is time to make a decision. They will also prompt you to jump skittishly each time the wind whistles or an animal calls out. Or they may prompt you to enter the market too early or too late, and probably too often.

The Jardine Range does not predict how wide the likely range will be. It does not predict that prices will go up to the top or bottom of the range.

Back to Newton

The Jardine Range does indicate the natural “gravitational forces” of the market. That is to say, the closer that prices move towards either VPC, the more they will be drawn to it. Without getting too astrological, think of the gravitational pull of earth towards objects in outer space, or even to objects on its surface. Taking that one step further, all nature is drawn to forces just as objects are drawn to gravity. Observe the heads of those guys perched at the bar as an attractive woman enters. Watch what a flower does when the sun comes out. It is easy to understand what happens when the market approaches either end of the Jardine Range. Traders will exit positions, and that will cause a momentum shift that could result in a reversal or just a pause. The extent of that shift is of no concern at this point in time. We merely need to understand that there will be a shift. What we do with that shift is covered in Part Two.

Objectivity is Your Friend, Subjectivity Your Enemy

Start now by drawing the Jardine Range on your charts at the end of each trading day. Then check it each morning before the market opens. Will the market open within that range? Or will there be a gap? If the market gapped up or down, you may need to re-draw the range so that it includes only the one VPC immediately above and the one VPC immediately below the opening price.

Observe what happens as prices move towards either of the VPCs. Consider how you could use this information to your advantage. Remember, this information is all objective. Something will likely happen at either end of the Jardine Range, regardless of news, sentiment, or what the talking heads are saying; regardless of what other pivot points, harmonics, or lines in the sand have been drawn. Actually, for the time being, it is a good idea to ignore the rest as you gain an understanding of just how powerful the Jardine Range can be.

Then you can build a trading system on top of the Jardine Range. You can gradually layer back in your other lines in the sand—but only, I suggest, as independent indicators to confirm what the Jardine Range is already telling you.

Then you can go back to your old methods, and see if the Jardine Range and the Universal System can help make you a better trader. Many traders I know do this.

Or you can do what I did, and just drop everything else and trade the Universal System. I use nothing else. It gives me time to listen to that gurgling stream, take the kayak out on a beautiful day, or jump in the car for an afternoon of photographic fun in the mountains. After all, that’s what it’s all about, isn’t it? And if the weather outside is foul, I stay in and design “productainment” applications for the iPhone over at LeftCoastLogic.com

SELF TEST QUESTIONS

1. What is the Jardine Range?

a. A high and low band created by a moving average above and below the current prices

b. The most recent day’s high and low that has not been touched yet by prices

c. The most recent VPC above and below the open prices

d. A range of Market Profile POCs that form a band around the current price

2. Is the Jardine Range predictive or reactive?

a. Predictive, because it predicts whether the market will go up or down from its opening price.

b. Reactive, because it is not concerned with which direction the market will go.

c. Neither. It neither predicts nor reacts to price movement.

d. Both. The range suggests that prices will touch both ends of the range at some point during the day.

December 14, 2011

Marketplace Books, the premier publisher of educational content in the trading and finance niche, announced their latest hardcover release, Profit with the Market Profile: Identifying Market Value in Real Time this week. Focused on Market Profile theory and technique, this brand new volume from Dr. John Keppler is one of only a handful of books dedicated to the subject, which has been garnering enthusiasts for years based on its ability to sharpen traditional technical analysis tools for increased trading profits.

As 2011 draws to a close, investors’ confidence remains shaky at best in a complex, turbulent global economy. Traders are looking for ways to cut through the noise and improve their bottom line in spite of today’s economic conditions—a considerable challenge that Profit with the Market Profile rises to meet. As Michael Jardine, author of Just a Trade a Day reviewed, “It is a book about how you can benefit from the unique simplicity of the Market Profile chart by incorporating it into your analysis…a different perspective for viewing and understanding market action.”

The book guides traders from the key elements of a Profile chart to insightful discussion of market auction theory for a new understanding of the market that will allow them to identify and track market value in real time in stocks, ETFs, futures, commodities, bonds, and currencies.

Trevor Hartnett, trader and founder of MarketDelta.com, one of the premier platforms for Market Profile charting, continued: “"This book offers a refreshing update to Market Profile and provides a very clear path for learning it and applying proven concepts. Given Dr. Keppler's background as a professor, he clearly distills what is important and conveys it in a manner that anyone can learn from.”

Dr. John Keppler is an active trader and the Director of the Strategic Trading Educational Program (www.strategictrading.net). He holds bachelor’s degrees in electrical engineering and business finance, as well as a MBA and PhD in Business. Dr. Keppler has been a business professor and a strategic trader for over twenty years, having taught at the University Of Utah School Of Business, the University of California, the College of Notre Dame, and the University of Baltimore. In addition to his university experience, Dr. Keppler presents trading seminars and workshops throughout the world. His trading experience in both U.S. and International financial markets includes trading stocks, ETFs, futures, Forex, options, and commodity futures. He has also developed a variety of proprietary strategic trading systems and indicators to help guide traders and investors through the maze of financial markets.

# # #

Marketplace Books is the preeminent publisher of trading, investing, and finance material. We produce high quality books, DVDs, and courses that showcase the exceptional talent working in the investment world today.

Jardine incorporates the Market Profile into his own trading systems, along with Fibonacci and other technical analysis to generate his one trade each day. You find the success of his system documented on www.enthios.com, where Jardine also shares his research every day. To hear what he thought about this new book on trading with the Market Profile, read on!

“Profit with the Market Profile is not a book about financial profits. It is a book about how you can benefit from the unique simplicity of the Market Profile chart by incorporating it into your analysis of the market. Dr. Keppler takes a scholarly approach while at the same time exploring 'what’s under the hood' – the mechanics of the Profile, and how it can be used as a different perspective for viewing and understanding market action.

The key to becoming a good trader is to apply multiple perspectives to the complex and sometimes conflicting messages of the market. The Market Profile provides that added dimension in a refreshingly straightforward, visually compelling manner. After reading Profit with the Market Profile, you will have a new lens for viewing the markets and a new arrow for your quiver of trading tools from which to build a consistent methodology that works for you."

To find out more about Profit with the Profile or to place your pre-order, click here.

Before the big event, I sat down with Michael to learn a little bit more about how he came to develop his trading skills and especially the "Trade a Day" method. Here's what he had to say:

TL: How long have you been trading?MJ: Since 1998, so nearly 14 years.

TL: What do you trade in your account?MJ: I trade the ES emini futures exclusively. I also invest in stocks. Have been steadily buying Apple since 2008.

TL: How did you get started?MJ: A friend knew I was geeky, and recommended I try it. I started with eTrade, then quickly moved to the CyberTrader platform. When I got interested in creating my own indicators, I moved to Ensign Software. They have even created an indicator for my method, called the Virgin POC.

TL: Was there any one person who helped to shape the trader you are today?MJ: Two people, actually. Randal Lockhart, Ph.D. taught me about pivots and market structure. He was over at UndergroundTrader.com. And a retired woman who moniker is "Citizen" taught me about Fibonacci and together we explored the applications of Fibonacci for intraday trading.

TL: Has there every been a book that profoundly affected your trading?MJ: Actually, I think the Joe Ross books are great because he does not use indicators. I don't use his methods anymore, but I have adapted his "no indicator" philosophy to help me understand how to build my own methods.

TL: If you weren't a trader or a trading educator, what do you think you would be doing?MJ: Actually, I do it now. I own a small company that designs productivity software for iPhones, iPads, and soon for the Mac. The initial investment came from my trading proceeds.

Can't wait to hear more from Michael? Follow him on Twitter @enthios. And be sure to join us at the Denver Trading Forum, October 21-23. For more information and to register, please visit www.tlforum.com. Look forward to seeing you there!

September 3, 2011

This October, Michael Jardine will be presenting at our Trading Forum in Denver, CO. If you have read his newest book (or even if you have not) this presentation is a must see!

This is for the trader who has other things to do than sit in front of a computer screen. Based on his recent book "Just a Trade a Day," Jardine demonstrates how to use the Market Profile to take just one trade a day. In this presentation, he also introduces a second method that effectively doubles your ROI and complements the first trade. These methods are also useful for active traders looking for corroboration of their own methods.

Jardine spends most of his day in front of a computer screen designing productivity apps. He spends about 30 minutes each day trading.

Most active traders suffer from "doing too much" and they end up digging themselves into deeper and deeper holes. Jardine’s methods can help you focus on just the important trades.

• Deliver consistency and objectivity to your trading, • Determine comfort levels in the markets by applying the Market ProfileTM and Points of Control • Utilize the Jardine Range to indicate key trend reversals, • Use Fibonacci techniques to optimize your exits, • Observe how the Universal System works in practice, • And more!

The moving averages—which include both stochastics and the moving average convergence divergence indicator (MACD)—are lagging indicators and, as such, are open to whipsaws. Whipsaws occur when prices jump back and forth across the moving average, and trigger false trade entry signals before the moving average can catch up with the price action. However the moving average may also function as a leading indicator when used together with the Bollinger Band. Both are lagging indicators, but by combining them together, they become leading indicators.

This application was introduced to me by Russell A. Lockhart, PhD., though I have adapted it to my own trading style. I would encourage you to do exactly the same—take a look, see how it works, and then adapt it for your own use.

Bollinger Bands, developed by John Bollinger,are moving averages of the standard deviation of prices, over a given period of time. Standard deviation (SDV) is the square root of the variance, and variance is a measure of how spread out a distribution is. These calculations are performed for you in the majority of charting programs. The Bollinger Bands show you exactly what price level, based on prices up and down over a given time period, would be considered to be out of the ordinary if prices were to then reach or exceed that level.

November 10, 2009

The following article from Michael Jardine is a teaser summary of his brand new, upcoming book. I (his editor) haven't even seen the full manuscript yet so this is a true "sneak peek"!

***They teach Lesson #1 of writing as early as elementary school: Tell them what you are going to say, then say it, then tell them what you said. Many years and one MBA later, I learned that no matter how long the document, if you can’t distill the “tell them” part into a one or two pages - the so-called “Executive Summary” – then anything else you write simply will not get read. So here’s a quick synopsis of what my upcoming book, A Trade A Day (tentative title), is about.

The market is dynamic. If we liken it to a pond, the major events of each day are made up of several large stones thrown into that pond. They will send out waves, and some will create a large wake. The most significant points are found where those waves and wakes cross.

July 24, 2009

When Hansel and Gretl were led into the forest, they marked their route back with breadcrumbs. It was a good idea but had one flaw: the birds came along and ate them all up. Hansel and Gretl were lost in the forest and were lucky to end up at the Gingerbread house.

Have you ever felt that way when trading?

You can use breadcrumbs in the market to help show you where you’ve been. This is important because it’s not just you who is looking back at the path. It’s the entire market, collectively. Everyone, including “the big guys,” looks back to see what happened in the past.

July 20, 2009

Believe it or not, there is no “they” who “manipulate” the market. But that is what many people choose to believe, particularly when they have lost money in a trade. It’s always “them.” But that is a bit convenient, don’t you think? Almost as convenient as looking out the back window and seeing the patterns of the road behind? The truth is, there is no “they.” It’s all “us.” The market is made up nothing more than people like us. True, some of them have larger accounts than the average day trader, but still the ‘large accounts’ are swimming in the same ocean and are still trading ‘against’ each other just as much as they are ‘with’ each other.

July 10, 2009

In the world of stock and commodities market analysis, technical indicators are like the Cowardly Lion’s courage, the Tin Woodman’s heart, or the Scarecrow’s brain: they just give you what you already have. Indeed, before computers and real-time intra-day charts, Wall Street traders made their money by ‘reading’ the ticker tape.

Then came technical analysis: our need to take the randomness of the market, and describe it mathematically. Some might call them the “Statistics of Folly” because all they really describe is what has already happened. That’s a bit like peering out the back window of your car as a kid and observing the patterns in the curves in the road – but would you really feel comfortable driving that way? I don’t think so.